A health maintenance organization (HMO) is a type of managed care organization (MCO) that provides a form of health care coverage in the United States that is fulfilled through hospitals, doctors, and other providers with which the HMO has a contract. The Health Maintenance Organization Act of 1973 required employers with 25 or more employees to offer federally certified HMO options.[1] Unlike traditional indemnity insurance, an HMO covers only care rendered by those doctors and other professionals who have agreed to treat patients in accordance with the HMO's guidelines and restrictions in exchange for a steady stream of customers.

"Open access" HMOs do not use gatekeepers - there is no requirement to obtain a referral before seeing a specialist. The beneficiary cost sharing (e.g., co-payment or coinsurance) may be higher for specialist care, however.[2]

HMOs also manage care through utilization review. That means they monitor doctors to see if they are performing more services for their patients than other doctors, or fewer. HMOs often provide preventive care for a lower copayment or for free, in order to keep members from developing a preventable condition that would require a great deal of medical services. When HMOs were coming into existence, indemnity plans often did not cover preventive services, such as immunizations, well-baby checkups, mammograms, or physicals. It is this inclusion of services intended to maintain a member's health that gave the HMO its name. Some services, such as outpatient mental health care, are limited, and more costly forms of care, diagnosis, or treatment may not be covered. Experimental treatments and elective services that are not medically necessary (such as elective plastic surgery) are almost never covered.

Other Choices for managing care are case management, in which patients with catastrophic cases are identified, or disease management, in which patients with certain chronic diseases like diabetes, asthma, or some forms of cancer are identified. In either case, the HMO takes a greater level of involvement in the patient's care, assigning a case manager to the patient or a group of patients to ensure that no two providers provide overlapping care, and to ensure that the patient is receiving appropriate treatment, so that the condition does not worsen beyond what can be helped.

HMOs often shift some financial risk to providers through a system called capitation. Certain providers (usually PCPs) receive a fixed payment per member per month in exchange for providing certain services, creating an incentive to provide as little care as possible. To counterbalance this trend some plans offer a bonus to providers whose care meets a predetermined level of quality.[How to reference and link to summary or text]

History

The earliest form of HMOs can be seen in a number of prepaid health plans. In 1910, the Western Clinic in Tacoma, Washington offered lumber mill owners and their employees certain medical services from its providers for a premium of $0.50 per member per month. This is considered by some to be the first example of an HMO. However, Ross-Loos Medical Group, established in 1929, is considered to be the first HMO in the United States; it was headquartered in Los Angeles and initially provided services for Los Angeles Department of Water and Power (DWP) and Los Angeles County employees. Approximately 500 DWP employees enrolled at a cost of $1.50 each per month. Within a year, the Los Angeles Fire Department signed up, then the Los Angeles Police Department, then the Southern California Telephone Company, (now at&t) and more. By 1951, enrollment stood at 35,000 and included teachers, county and city employees. In 1982 through the merger of the Insurance Company of North America (INA) founded in 1792 and Connecticut General (CG) founded in 1865 came together to become CIGNA. Ross-Loos Medical Group, became now known as CIGNA HealthCare. Also in 1929 Dr. Michael Shadid created a health plan in Elk City, Oklahoma in which farmers bought shares for $50 to raise the money to build a hospital. The medical community did not like this arrangement and threatened to suspend Shadid's licence. The Farmer's Union took control of the hospital and the health plan in 1934. Also in 1929, Baylor Hospital provided approximately 1,500 teachers with prepaid care. This was the origin of Blue Cross. Around 1939, state medical societies created Blue Shield plans to cover physician services, as Blue Cross covered only hospital services.
These prepaid plans burgeoned during the Great Depression as a method for providers to ensure constant and steady revenue.

Certain state-imposed restrictions on HMOs were removed if the HMOs were federally certified

Employers with 25 or more employees were required to offer federally certified HMO options alongside indemnity upon request

This last provision, called the dual choice provision, was the most important, as it gave HMOs access to the critical employer-based market that had often been blocked in the past. The federal government was slow to issue regulations and certify plans until 1977, when HMOs began to grow rapidly. The dual choice provision expired in 1995.

In 1971, Dr. Gordon K MacLeod MD developed and became the director of the United States' first federal Health Maintenance Organization (HMO) program. He was recruited by Elliot Richardson, former secretary of the U.S. Department of Health, Education and Welfare.

Switzerland

Since 1990, Switzerland has funded several HMOs, covering 10 percent of the Swiss population as of March 2006; most HMOs are located in cities. The percentage would be much higher if there were HMOs in all regions. There are mountainous regions where the population density is too low to support HMOs. Insurances grant premium reductions to people who visit HMOs instead of their normal doctor; but this, at the same time, lures younger and healthier people into HMO insurance schemes, thus negating some of the financial benefits for the overall healthcare system. Switzerland, in stark contrast to the US, has an obligatory health insurance in effect, and thus Swiss HMOs are more complex entities than in the United States.

Types of HMOs

HMOs operate in a variety of forms. Most HMOs today do not fit neatly into one form; they can have multiple divisions, each operating under a different model, or blend two or more models together.

In the staff model, physicians are salaried and have offices in HMO buildings. In this case, physicians are direct employees of the HMOs. This model is an example of a closed-panel HMO, meaning that contracted physicians may only see HMO patients.

In the group model, the HMO does not employ the physicians directly, but contracts with a multi-specialty physician group practice. Individual physicians are employed by the group practice, rather than by the HMO. The group practice may be established by the HMO and only serve HMO members ("captive group model"). Kaiser Permanente is an example of a captive group model HMO rather than a staff model HMO, as is commonly believed. An HMO may also contract with an existing, independent group practice ("independent group model"), which will generally continue to treat non-HMO patients. Group model HMOs are also considered closed-panel, because doctors must be part of the group practice to participate in the HMO - the HMO panel is closed to other physicians in the community.[3]

Physicians may contract with an independent practice association (IPA), which in turn contracts with the HMO. This model is an example of an open-panel HMO, where a physician may maintain their own office and may see non-HMO members.

In the network model, an HMO will contract with any combination of groups, IPAs, and individual physicians. Since 1990, most HMOs run by managed care organizations with other lines of business (such as PPO, POS and indemnity) use the network model.

California HMO basics

Primary care doctor: In most HMOs you must have a main doctor, called a primary care physician, or PCP. This doctor gives you most of your care and refers you for other services when you need them. Usually, you must see this doctor first before you can see a specialist. Your primary care doctor must be in the HMO’s network.

Medical group: Your medical group is the group of doctors and other providers that your primary care doctor is in. The medical group has a contract with the HMO to provide your care.

Networks and medical groups: Each HMO has a network of doctors, medical groups, labs, hospitals, and other providers who work for the HMO or have a contract with it. You must get approval from your HMO to get care from a provider outside the network, unless it’s an emergency, or you need urgent care and are outside your plan’s area. Most of the providers you see are also in your medical group. Ask the plan to mail you a copy of its provider directory. Or look on the plan’s website.

Referrals and pre-approval: You must have a referral to see a specialist or get most other services. Your HMO or medical group must approve many of your services before you can get them. Usually it is your doctor who gives you a referral and asks for pre-approval.[4]

Regulation in the US

HMOs are regulated at both the state and federal levels. They are licensed by the states, under a license that is known as a certificate of authority (COA) rather than under an insurance license. [5] In 1972 the National Association of Insurance Commissioners adopted the HMO Model Act, which was intended to provide a model regulatory structure for states to use in authorizing the establishment of HMOs and in monitoring their operation.

Legal responsibilities

HMOs often have a negative public image due to their restrictive appearance. HMOs have been the target of lawsuits claiming that the restrictions of the HMO prevented necessary care. Whether an HMO can be held responsible for a physician's negligence partially depends on the HMO's screening process. If an HMO only contracts with providers meeting certain quality criteria and advertises this to its members, a court may be more likely to find that the HMO is responsible, just as hospitals can be liable for negligence in selecting physicians. Since the HMO controls only the financial aspect of providing care, not the medical aspect, it is often insulated from malpractice lawsuits. The Employee Retirement Income Security Act (ERISA) can be held to preempt negligence claims as well. In this case, the deciding factor is whether the harm results from the plan's administration or the provider's actions.